Turkey Spearheads Major Regional Energy and Transportation Projects

TCA ISSUE PAPER-31
November 27, 2007

Turkish Prime Minister Tayyib Erdogan and Greek Prime Minister Kostas Karamanlis officially inaugurated a pipeline on November 18 carrying the first natural gas from the Shah Deniz field in Azerbaijan to Europe. The 300 km pipeline project was hailed as the start of a new period of bilateral co-operation between Greece and Turkey. The pipeline links western Turkey with north-east Greece beneath the Marmara Sea and was built by a joint venture of the Turkish and Greek gas utility corporations. A 970-kilometre stretch runs in the opposite direction, from Turkey through Azerbaijan and Georgia. “This pipeline will boost prosperity in the region,” Prime Minister Erdogan said. “The silk route will also become an energy route linking East and West through Turkey.”

Samuel Bodman, US Energy Secretary, and President Ilham Aliyev of Azerbaijan attended the opening ceremony, which underscored US commitment to promoting the energy-rich Caspian region as an alternative energy provider to Russia. The Greek-Turkish pipeline will carry up to 400,000 cubic meters of Azeri natural gas primarily for Greece’s domestic consumption, and its capacity is expected to at least double in the future.

Another key development last week that underscored Turkey’s leading role in linking the Caspian region to the West, was the formal launching of the construction of a railway network, connecting Turkey, Georgia and Azerbaijan. The Baku-Tblisi-Kars project, which links the eastern Turkish city of Kars with the Georgian and Azerbaijani capitals is expected to cost nearly $600 million, and will entail building 29 km of rail in Georgia and 76 km in Turkey. The railway is expected to be completed by the end of 2008.

President Abdullah Gul of Turkey, President Ilham Aliyev of Azerbaijan and President Mikhail Saakashvili of Georgia broke the ground for the construction and called it a “historical day.”

The railroad will carry 5 million tons of goods in its first stage and will expand to 10-15 million tons of transportation capacity in its later stages.

The three countries have already cooperated to build a corridor of pipelines to deliver oil and gas from the energy-rich Caspian Sea to Turkey and beyond. One of the key components of this vision has materialized through the building of the Baku-Tblisi-Ceyhan oil pipeline.

Remarks Prepared for Delivery by U.S. Sec. of Energy Samuel W. Bodman

It is a great pleasure to be with you to mark the opening of the Turkey-Greece Inter-Connector pipeline.

This extraordinary project is the first link between Azerbaijan and Caspian gas suppliers of Central Asia to European consumers. The pipeline is a significant development, one that builds a critical new energy bridge between the East and West. Its presence marks the beginning of a market expansion leading to diversification for consumers and suppliers - who will all benefit from the resulting competition.

This project is remarkable in many ways, not the least of which is the technical and financial complexity involved in its construction. Building this pipeline also required regional consensus, complex environmental analyses, and a lengthy and productive dialogue with all of the communities along the entire route.

We congratulate those who have provided the leadership necessary to begin this project and to bring it to its successful conclusion, including our host, Prime Minister Karamanlis and Prime Minister Erdogan. Without the vision and commitment of those who conceived this pipeline, we would not be here today.

I also want to pay special tribute to the Turkish and Greek people for the cooperation they have shown on this project. This pipeline is a success for the people of both countries as well as for Azerbaijan.

TGI also represents a major advancement for the countries in Southern Europe. It provides a vital new energy supply link that underscores the new ways of doing business in Central Asia, a region full of new energy partners.

Change almost always involves some element of risk. The leaders here today represent the region's new energy partners that understand the best way to achieve long term energy security for their countries is through the establishment of competitive energy markets. And, in my judgment, they are working diligently to bring this about.

This Turkey-Greece Inter-Connector is a critical first step in a new energy supply chain; and it comes on line at a critically important time. The European Union is the world's biggest gas import market - and one of the world's fastest growing. It is reasonable to expect that Europe's dependence on energy imports will continue to grow over the next 25 years - meaning that Azerbaijan and the rest of Central Asia is poised to become Europe's newest main source of supply, alongside the North Sea region, Russia, and North Africa.

For Central Asia - and for Europe - this presents a real opportunity, but one that will only be realized through the continued cooperation of all the potential stakeholders. The development of new projects over considerable distances is costly; they will need to be undertaken on a large scale if they are to be commercially viable. New partners - including Turkmenistan and Kazakhstan - need to be brought into negotiations and the EU will need to open up its gas markets to competition.

These are daunting but achievable tasks. The fact that we are all standing here today proves that. Let us leave here today with a firm commitment to move forward towards the creation of a strong and growing coalition of partners dedicated to establishing Central Asia as the next great European energy supplier.

By any definition, today's event is a remarkable accomplishment for the governments and people of Turkey and Greece and for the consortium of private companies that worked to make this dream a reality. I want to again congratulate all those involved.